To grant an EIP under §19a EStG, your company must have fewer than 1,000 employees, annual revenue of at most €100 million or a balance-sheet total of at most €86 million, and must have been founded no more than 20 years before the date of the grant. These thresholds must be met either in the year of the grant or in any one of the six preceding calendar years, giving fast-growing companies a meaningful grace window. A group clause added in 2024 also allows shares in an affiliated group company to qualify, not only those of the direct employer.
§19a EStG is what makes an EIP worthwhile: it defers the income tax on the grant until a later triggering event, so employees are not taxed on shares they cannot yet sell. But the deferral only applies if your company meets the eligibility criteria at the time of the grant. This page sets out exactly what those criteria are and how to read them.
For a full explanation of what an EIP is and how it compares to a VSOP or ESOP, see VSOP vs ESOP vs EIP: which model for a German GmbH.
What are the company eligibility criteria for §19a?
Three thresholds must be met. They apply to the company at the time of the grant, or in one of the six preceding calendar years (see below).
1. Fewer than 1,000 employees. The headcount limit is 999 full-time equivalents. Part-time employees count on a pro-rata basis. The threshold applies to the company as a whole, not to a specific entity within a group.
2. Revenue or balance-sheet limit. The company must have either annual revenue of at most €100 million or a balance-sheet total of at most €86 million. These are alternative conditions: meeting either one is sufficient. A company that exceeds the revenue limit but stays within the balance-sheet limit still qualifies.
3. Founded no more than 20 years before the grant. The company's founding date is measured against the date of the share transfer to the employee. A company incorporated 21 years ago cannot use §19a regardless of its size.
These thresholds were expanded significantly by the Future Financing Act (ZuFinG) in 2024. The previous limits were 250 employees, €50 million revenue, €43 million balance sheet, and a 12-year age cap. The current figures apply to grants made from 1 January 2024 onwards.
Does the 6-year lookback window help you?
Yes, and it is one of the most practically useful parts of the current rules. The thresholds do not need to be met in the year of the grant specifically: they need to have been met in that year or in any one of the six preceding calendar years.
This matters most for fast-growing companies. A startup that has grown past 1,000 employees or €100 million in revenue in the current year can still grant §19a-qualifying EIPs, provided the thresholds were met within the last six years. Conversely, a company that has been above the limits for seven or more consecutive years would no longer qualify for new grants.
What about affiliated group companies?
Since 1 January 2024, the Konzernklausel (group clause) allows shares in an affiliated group company (for example, a parent holding company) to also qualify for §19a deferral, not only shares of the direct employer. The eligibility thresholds must still be met by the relevant entity.
This is relevant for companies operating in group structures where the most economically meaningful shares are at the parent level rather than the operating subsidiary. Prior to the 2024 amendment, §19a only applied to shares of the direct employing entity.
Note: the requirement that the share-issuing entity be a German entity remains in place under current law. Whether EU-incorporated limited companies can issue §19a-qualifying shares is subject to ongoing tax ruling procedures and should not be treated as settled.
What does the employee need to do?
§19a deferral does not apply automatically. Two things are required on the employee side.
Consent. The employee must consent to the deferral being applied through payroll. It cannot be claimed retroactively via the employee's personal tax return. Consent is typically built into the EIP participation agreement at the time of the grant.
Lohnkonto entry. The employer must record the untaxed benefit at grant in the employee's Lohnkonto (payroll account), including the valuation basis. The standard payroll record-keeping period is six years, but that clock does not start until the deferred tax is actually paid. Records must be kept for six years after the tax event, not six years after the grant.
Optional: employer liability declaration (§19a Abs. 4a). If the employer irrevocably declares it will assume liability for the wage tax, the employment-ending trigger and the 15-year trigger are both suspended. Tax then falls due only on an actual sale of the shares. This declaration materially improves the employee's position (they are only taxed when they have liquidity) and is standard practice in a well-structured EIP.
Eligibility checklist
Company criteria: use this to confirm your company can grant a §19a EIP at all:
- Fewer than 1,000 employees (FTE)
- Annual revenue of at most €100 million, OR balance-sheet total of at most €86 million
- Founded no more than 20 years before the planned grant date
- At least one of the above was met in the grant year or in one of the six preceding calendar years
- Shares are in a German entity (or an affiliated group company per the Konzernklausel)
Per-grant requirements: once the company qualifies, each individual grant also requires:
- The employee's consent to §19a deferral being applied through payroll
- The untaxed benefit recorded in the employee's Lohnkonto at grant
If your company meets these criteria, an EIP structured under §19a is available to you. The next question is which design model and setup approach makes sense. See How to Set Up an Employee Equity Plan in Germany for the full workflow, and when and how to implement the new EIPs under §19a EStG for the EIP route specifically.
FAQ
What happens if our company grows past the §19a thresholds after we implement an EIP?
Existing grants are not affected. The eligibility criteria apply at the time of each grant, not for the lifetime of the program. For new grants, the 6-year lookback still applies: as long as your company was under the thresholds in any of the six preceding calendar years, new grants continue to qualify. Eligibility for new grants only ends once every year in that lookback window was also over the threshold.
Does the 20-year founding limit apply from incorporation or from the first product launch?
It applies from the date of legal incorporation (Gründungsdatum), not from the date of first revenue or product launch. For companies that have changed legal form or undergone a restructuring, the relevant date is typically the founding of the entity that is issuing the shares.
Can a German subsidiary use §19a to grant shares in its non-German parent?
The Konzernklausel allows shares in affiliated group companies to qualify, but the share-issuing entity must currently be a German entity under the statute as written. Whether EU-incorporated parents can issue §19a-qualifying shares is subject to ongoing tax ruling procedures. Until those rulings are confirmed, cross-border EIP structures involving a non-German issuing entity should be treated as legally uncertain and discussed with a specialist.
Is the €2,000 annual tax-free allowance separate from §19a?
Yes. The §3 Nr. 39 EStG allowance (€2,000 per year for employee equity participation) is a genuine exemption from income tax, distinct from the §19a deferral. It applies to employee capital participation offered to all employees with at least one year of tenure. The two can apply alongside each other but serve different purposes: the allowance exempts a small amount outright, while §19a defers the tax on the full grant value until a triggering event.
What triggers the end of the §19a deferral period?
Tax on the deferred benefit falls due at the earliest of: disposal of the shares (particularly a sale), the end of the employment relationship, or 15 years after the transfer. If the employer has made the §19a Abs. 4a liability declaration, the employment-ending and 15-year triggers are suspended: tax then falls due only on an actual sale.
